GOVERNANCE REP RT 2019

GOVERNANCE REP RT2019

BETTER DIRECTORS. BETTER BOARDS. BETTER BUSINESS.

REPORTINGSUITE

INTEGRATED REPORT

INTEGR TED REP RT2019


• Primary communication to stakeholders on our value-creation process

• Prepared in accordance with the International <IR> Framework

ANNUAL FINANCIAL STATEMENTS

ANNUAL FINANCIALSTATEMENTS2019BETTER DIRECTORS. BETTER BOARDS. BETTER BUSINESS.

• Statements of financial performance and position

• Prepared in accordance with IFRS

GOVERNANCE REPORT

GOVERNANCE REP RT2019


• An explanation of our application of good governance

• Prepared in accordance with the King IV Report on Corporate Governance in South Africa 2016 (King IV)

This report is a supplementaryto the 2019 Integrated Report and expands on our organisational governance and King IVapplication.

https://cdn.ymaws.com/www.iodsa.co.za/resource/collection/6C2BA722-90AB-4F12-900E-7EE12C06CC1B/IoDSA_Integrated_Report_2019.pdf

https://www.iodsa.co.za/resource/collection/6C2BA722-90AB-4F12-900E-7EE12C06CC1B/IoDSA_Annual_Financial_Statement_2019.pdf

1IoDSA GOVERNANCE REPORT 2019

CONTENTS2 INTRODUCTION

2 LEADERSHIP

4 ORGANISATIONAL ETHICS

6 RESPONSIBLE CORPORATE CITIZEN

8 STRATEGY AND PERFORMANCE

9 REPORTING

10 PRIMARY ROLE AND RESPONSIBILITIES OF THE BOARD

11 COMPOSITION OF THE BOARD

16 COMMITTEES OF THE BOARD

24 EVALUATION OF THE PERFORMANCE OF THE BOARD

25 APPOINTMENT AND DELEGATION TO MANAGEMENT

26 RISK GOVERNANCE

27 TECHNOLOGY AND INFORMATION GOVERNANCE

28 COMPLIANCE GOVERNANCE

29 REMUNERATION GOVERNANCE

30 ASSURANCE

31 STAKEHOLDERS

31 CONCLUSION

2 IoDSA GOVERNANCE REPORT 2019

INTRODUCTION

LEADERSHIP

The Institute of Directors in South Africa (IoDSA) continues to apply and maintain the principles of the King IV Report on Corporate Governance™ for South Africa 2016 (King IV).1

Through ethical and effective leadership, we endeavor to achieve the governance outcomes of an ethical culture, good performance, effective control and legitimacy.

This governance report outlines how the IoDSA, as a positive role model for governance, applies good governance as recommended by King IV.

1 We show commitment2 We understand the ‘why’

3 We are dependable4 We do the right things

PURPOSE

1 We innovate2 We are agile

3 We are efficient4 We have drive

PASSION

1 We act with integrity2 We show respect

3 We are team players4 We communicate well

PROFESSIONALISM

1 We display excellence2 We find solutions

3 We take on more4 We strive to improve

PERFORMANCE

THE BOARD LEADS ETHICALLY AND EFFECTIVELY

The Board is the focal point and custodian of corporate governance in the IoDSA. All Board members uphold the IoDSA values, which were updated in 2019.

1 Copyright and trademarks are owned by the Institute of Directors in South Africa NPC and all of its rights are reserved.


INTEGRITY: Our Board members undertake to consistently live up to the highest ethical standards and ensuring they act in good faith and in the best interests of the IoDSA. Their conflicts of interest are disclosed and managed regularly, and confirmed at each Board and Board Committee meeting.

COMPETENCE: Our Board members ensure they have the required competence to serve on the Board and maintain the suitable level of professional development. Each Board member annually confirms adherence to the Continuous Professional Development (CPD) Policy. Furthermore, in 2019 an in-depth review of the skills on the Board was done. The Nominations Committee considers skills gaps when short-listing potential Board candidates; and in 2020 the current area of focus is legal, sustainability and marketing.

RESPONSIBILITY: Our Board members act and conduct themselves responsibly, particularly in leading the IoDSA and its direction and strategy. The Board Charter confirms this expectation. In 2019 a fruitful strategy session was held and attended by all Board members. Collectively, Board and Board Committee meetings attendance was satisfactory. Members are prepared and participate in constructive discussions before reaching decisions. They interrogate management reports with necessary degree of skepticism, before reaching a decision on key matters.

ACCOUNTABILITY: Our Board members are willing and able to answer and justify decisions that are made by the Board and Board Committees. This is required in the Board Charter and Board Code of Conduct.

FAIRNESS: Our Board members fairly consider the legitimate interests and expectations of IoDSA stakeholders in decision-making and strategy. As an organisation the IoDSA applies a stakeholder-inclusive approach in the execution of our governance role and responsibilities as per the Stakeholder Policy. Accordingly, our Board applies this in all matters for consideration by the IoDSA Board.

TRANSPARENCY: Our Board members act transparently in their conduct. Board members transparently exercise their governance roles and responsibilities, as evidenced by this report and other IoDSA reports.

IN ALIGNMENT WITH THE KING IV VALUES CHARACTERISING ETHICAL AND EFFECTIVE LEADERSHIP, THE BOARD EXHIBITS:

Board membersannually confirmtheir compliancewith the IoDSABoard Codeof Conduct(which requiresthe abovecharacteristics)in writing.


ORGANISATIONALETHICS

THE BOARD GOVERNS THE ETHICS OF THE IoDSA IN A WAY THAT SUPPORTS AN ETHICAL CULTURE

The Board assumes responsibility for the governance of ethics through setting the direction for how the IoDSA should approach and address ethics within the organisation. The Board delegates implementation and execution to management and oversees, through the Social and Ethics Committee:

adherence to the IoDSA values;

execution of the Board-approved Board Code of Conduct, Employee Code of Conduct as well as the Ethics Policy; and

any key ethical risks, thereby giving effect to organisational ethics.

The Ethics Policy and both Codes of Conduct are part of our organisational policies and they are applicable to all employees and Board members respectively. All of these documents were reviewed and approved in 2019. The IoDSA faculty is contractually bound by the IoDSA Facilitator Code of Conduct. In 2019 the IoDSA values were revised, with employee input, to ensure shared belief and connection to the values set and expected.

Employees are contractually bound to uphold the IoDSA’s policies and procedures and all employees were assessed on these during 2019, to ensure awareness and familiarity. We uphold and apply our ethical standards with all of our employees. Warnings for misconduct and/or appropriate measures are taken to ensure our policies and values are upheld.

During 2019 we made our Ethics Policy publically available via our website and in 2020 there will be a move to include this in our contractual arrangements with external stakeholders.

The Social and Ethics Committee monitors the annual independent ethics assessment. The IoDSA maintained its A rating in the 2019 assessment, with an improvement in overall scoring from 3.95 to a 4.41. There was also a significant increase in staff completing the survey from 72.7% in 2018 to 87% for 2019.

The Whistle-blowing policy was also approved by the Board and implemented by management. Reports received are monitored and investigated by the Social and Ethics Committee – there were however no incidents logged on the independent whistle-blowing hotline in 2019.


RESPONSIBLECORPORATE CITIZENTHE BOARD ENSURES THAT THE IoDSA IS AND IS SEEN TO BE A RESPONSIBLE CORPORATE CITIZEN

The Board is responsible for corporate citizenship and how it is approached and addressed.

The Board oversees our vision, mission, values and strategic objectives – all of which were reviewed in 2019 – and collectively these are consistent with responsible corporate citizenship. The Board upholds the Constitution of South Africa and ensures compliance with applicable laws and codes adopted by the IoDSA in accordance with its compliance universe.

The Board, through its Social and Ethics Committee, oversees and monitors the results of the IoDSA’s activities, outputs and outcomes on the 6 Capitals. The 6 Capitals are derived from the International Integrated Reporting Framework and consist of financial, manufactured, intellectual, human, social and relationships and natural capital. The Social and Ethics Committee mandate is divided into the following areas:

Workplace:The IoDSA adheres to laws relating to employment equity and best practice fair remuneration. This is achieved through the benchmarking of salaries, applying our Remuneration Policy, and an overlapping membership between the Social and Ethics and Remuneration Committees.

The IoDSA’s Health and Safety Committee undergoes an annual review of health and safety compliance. In 2019, the IoDSA was found to be 91.9% (2018: 92.3%) compliant with the Occupational Health and Safety (OHS) Act and applicable regulations. We were awarded a Certificate of Successful Completion of the Requirements of the OHS Audit.

Ongoing employee wellness initiatives and a culture survey was conducted in 2019 in order to

understand and improve employee morale. We continued to offer bursaries and training allowances to employees. The IoDSA once again received a pleasing “A” rating/score for its 2019 ethics monitor survey.

The Social and Ethics Committee oversees broad-based black economic empowerment (BBBEE) compliance. For our June 2019 assessment we elected to sign the BBBEE affidavit, which resulted in us receiving a Level 2 BBBEE rating under the Qualifying Small Enterprise Scorecard. Our strategy for 2019/2020, as we exceed the R50 million turnover mark and will be assessed on the Generic Scorecard, will be to achieve a Level 4 BBBEE rating.


Economy:Through our advocacy for ethical and effective leadership, the IoDSA serves as a voice against fraud and corruption. We are an active member of the Anti-Intimidation and Ethical Practices Forum, aiming to assist professionals who are intimidated for exposing corruption.

We continued our collaboration with The Ethics Institute on ethics training to influence ethical behavior outside of the IoDSA. We delivered 23 ethics related programmes in 2019.

The IoDSA maintains compliance with tax legislation. We received a tax clearance certificate for good standing. As a registered professional body, we maintained our adherence to the South African Qualifications Authority requirements. We released two video training modules on Governance for SMEs to the public at no charge, in order to improve the growth and survival rates of these organisations (which have a significant impact on the economy in South Africa) through better understanding, and early adoption of good governance. In addition, we trained and provided support to one supplier development and one enterprise development organisation in 2019.

Social Environment:Our governance model is stakeholder-inclusive. We take into account the interests of major stakeholders in decision-making. In 2019 we updated our Stakeholder Engagement Framework. Further detail can be found in Section 16 of this document.

For the 5th consecutive year we completed an independent reputation survey to assess our stakeholders’ views and legitimate needs, interests and expectations. Corporate Management; Corporate Capital; Corporate Positioning; Corporate Performance and Corporate Dialogue were measured and overall we scored 82% which is considered an excellent reputation score.

In alignment with our BBBEE strategy, we awarded 3 learnership programmes to previously disadvantaged students. The learnerships will run from October 2019 till September 2020. New learnerships’ will be issued in 2020 to further new learners as an ongoing initiative for the IoDSA. We also did a blanket drive collecting 200 blankets for charity throughout the three main regions.

Natural Environment:In 2019 we considered the IoDSA’s contribution to the United Nations Sustainable Development Goals. We also reduced our paper usage for training programme material, and continued with our recycling initiatives.


STRATEGY ANDPERFORMANCETHE BOARD APPRECIATES THAT THE IoDSA’s CORE PURPOSE, ITS RISKS AND OPPORTUNITIES, STRATEGY, BUSINESS MODEL, PERFORMANCE AND SUSTAINABLE DEVELOPMENT ARE INSEPARABLE ELEMENTS OF THE VALUE-CREATION PROCESS

The Board reviews and upholds the strategic direction of the organisation. It approves a strategy for the business, and delegates its implementation to management. The strategy is implemented through the Board-approved annual business plan and budget.

During 2019 we reviewed and updated the IoDSA vision, mission, strategic objectives and the medium term goals. We also performed a SWOT analysis and created a strategic intent.

Management monitors the organisation’s performance as per the annual business plan and budgets through monthly reporting. The Board monitors performance through the Chief Executive Officer’s (CEO) quarterly Board report and biannual feedback from the Board Committees. If any matters arise on an ad hoc basis, they are brought to the Board’s attention and managed accordingly.

Further information on our business model, strategy, risks and performance can be found in the 2019 Integrated Report



REPORTINGTHE BOARD ENSURES THAT REPORTS ISSUED BY THE IoDSA ENABLE STAKEHOLDERS TO MAKE INFORMED ASSESSMENTS OF THE IoDSAs PERFORMANCE, AND ITS SHORT, MEDIUM AND LONG-TERM PROSPECTS

The Board assumes responsibility for the IoDSA’s reporting by determining the approach, overseeing the execution, and approving management’s determination of reporting frameworks.

Call for non-executive director (NED) nominations to the IoDSA Board;

Annual General Meeting (AGM) notice;

Integrated report;

Annual financial statements;

Governance report;

Amended MoI to reflect company name change.

Apart from ad hoc stakeholder communications, the IoDSA issued the following formal annual communications and reports:

The Board is satisfied that the above reports and notices comply with legal and best practice requirements, and meet the legitimate and reasonable information needs of the organisation’s material stakeholders.

The Board is satisfied with management’s basis for determining materiality for the purpose of deciding which information to include in external reports, as well as its assessment of reporting frameworks to be used. The Board is further satisfied with the assurance obtained on above stated reports.


PRIMARY ROLE ANDRESPONSIBILITIES OF THE BOARDTHE BOARD SERVES AS THE FOCAL POINT AND CUSTODIAN OF CORPORATE GOVERNANCE IN THE IoDSA.

THE BOARD:

steers the organisation by setting its strategic direction;

approves policy and planning that give effect to that direction;

oversees and monitors implementation and execution by management; and

ensures accountability for organisational performance through reporting and disclosure.

The Board Charter provides for the Board’s composition, the roles and responsibilities of the Board, the Chair and the Lead Independent, access to information, delegation by the Board, performance evaluations and meeting procedures.

The Board Charter is reviewed annually and approved by the Board. The Board is satisfied that it has fulfilled its roles and responsibilities in accordance with its Board Charter for 2019. In executing its duties, the Board held four scheduled meetings, with attendance as follows.

Board member Scheduled meeting attendancePrieur du Plessis (until June 2019) 1/1Muhammad Seedat 4/4Ntuthuko Bhengu 4/4Sana-Ullah Bray 4/4Angela Cherrington (until March 2019) 1/1Zeona Jacobs 3/3Patrick Kabuya (until June 2019) 1/1Sherma Malan (from August 2019) 1/1Felicia Msiza 3/4Parmi Natesan 4/4Louisa Stephens 4/4Eileen Wilton (from June 2019) 3/3


COMPOSITION OFTHE BOARDTHE BOARD COMPRISES THE APPROPRIATE BALANCE OF KNOWLEDGE, SKILLS, EXPERIENCE, DIVERSITY AND INDEPENDENCE FOR IT TO DISCHARGE ITS GOVERNANCE ROLE AND RESPONSIBILITIES OBJECTIVELY AND EFFECTIVELY

CompositionThe IoDSA Board of Directors is elected from its membership at the AGM held in June each year, at which all subscription-paying members have voting rights.

We also saw Prieur du Plessis’ (Chair from June 2017 to June 2019) term came to an end. A further 2 Board members were up for rotation and both stood for re-election, namely Sana-Ullah Bray and Patrick Kabuya. We also had two new candidates stand for election, Eileen Wilton and Marius Schoeman. Sana-Ullah Bray and Eileen Wilton were voted in at the AGM as Board members.

As at 31 December 2019, the Board comprised of 9 Board members, which is within the maximum and minimum limits of 8-15 Board members as provided for in the MoI.

The Board consists of a majority of NEDs (7 out of 9 members), all of whom are considered independent. The CEO is an ex-officio member of the Board. The Board determines which other executives may serve as ex-officio members. During the course of 2019 the Board decided to appoint an additional executive director, so as to have 2 executive Directors on the Board.

NEDs are elected for a 3-year term. The IoDSA applies a staggered rotation of NEDs with one third retiring by rotation each year. Retiring individuals are eligible for re-election for maximum of 2 further terms. NEDs do not serve longer than 9 years.

In 2019 Pumla Radebe resigned from the Board. Angela Cherrington’s fixed-term contract as CEO came to an end on 31 March 2019 and thus she was no longer a board member as of 1 April 2019.


COMPOSITION OFTHE BOARD (continued)

Board members as at 31 December 2019The Board subscribes to the philosophy of diverse representation; and promotes diversity of knowledge, skills, experience, age, culture, race and gender in its membership. This includes the use of a Board skills matrix, ongoing monitoring by the Nominations Committee, and diversity considerations during short-listing of candidates for Board vacancies.

Below is a short synopsis of each Board member as at 31 December 2019:

NTUTHUKO BHENGU (51)

SANA-ULLAH BRAY (46)

ZEONA JACOBS (56)

SHERMA MALAN (49)

FELICIA MSIZA (45)

PARMI NATESAN (40)

MUHAMMAD SEEDAT (37)

LOUISA STEPHENS (43)

EILEEN WILTON (60)

INDEPENDENT NON-EXECUTIVE DIRECTOR



EXECUTIVE DIRECTOR


EXECUTIVE DIRECTOR

(CHAIR)INDEPENDENT NON-EXECUTIVE DIRECTOR

(LID)INDEPENDENT NON-EXECUTIVE DIRECTOR


Race: African Race: Indian Race: Coloured Race: White Race: African Race: Indian Race: Indian Race: African Race: White

Tenure at 31 Dec 2019: 2.5 years


Tenure at 31 Dec 2019: 1.5 year







Designations and qualifications:• Chartered Director (SA)• MPH Healthcare

Management• MBA• DA• MBChB

Designations and qualifications:• BA (Law)• LLB• Management

Development Programme

• Executive Leadership Development Programme

Designations and qualifications:

• Management Advancement Programme

• Business Management Programme

Designations and qualifications:• MBA• PG Dip. Financial

Planning• B Ed (Hons)• B Com Ed

Designations and qualifications:• Chartered Director (SA)• MBA• H.Dip Tax• BCom

Designations and qualifications:• Chartered Director (SA)• Chartered Accountant

(SA)• BCom (Hons)• BCom (cum laude)

Designations and qualifications:• BCompt


(SA)• BCom (Hons)• Business Science

Designations and qualifications:• Higher Diploma in

Education• BCom• Post Graduate

Diploma in Digital Studies (with distinction)



NTUTHUKO BHENGU (51)

SANA-ULLAH BRAY (46)

ZEONA JACOBS (56)

SHERMA MALAN (49)

FELICIA MSIZA (45)

PARMI NATESAN (40)

MUHAMMAD SEEDAT (37)

LOUISA STEPHENS (43)

EILEEN WILTON (60)




EXECUTIVE DIRECTOR


EXECUTIVE DIRECTOR

(CHAIR)INDEPENDENT NON-EXECUTIVE DIRECTOR

(LID)INDEPENDENT NON-EXECUTIVE DIRECTOR


Race: African Race: Indian Race: Coloured Race: White Race: African Race: Indian Race: Indian Race: African Race: White



Tenure at 31 Dec 2019: 1.5 year







Designations and qualifications:• Chartered Director (SA)• MPH Healthcare

Management• MBA• DA• MBChB

Designations and qualifications:• BA (Law)• LLB• Management

Development Programme

• Executive Leadership Development Programme

Designations and qualifications:

• Management Advancement Programme

• Business Management Programme

Designations and qualifications:• MBA• PG Dip. Financial

Planning• B Ed (Hons)• B Com Ed

Designations and qualifications:• Chartered Director (SA)• MBA• H.Dip Tax• BCom


(SA)• BCom (Hons)• BCom (cum laude)

Designations and qualifications:• BCompt


(SA)• BCom (Hons)• Business Science

Designations and qualifications:• Higher Diploma in

Education• BCom• Post Graduate

Diploma in Digital Studies (with distinction)


Tenure (%)

22

45

22

11

1 year (2) 1.5 – 3 years (4)3.5 – 6 years (2)6.5 – 9 years (1)

Race (%)

22

78

White (2) African, Coloured and Indian (7)

BOARD DIVERSITY STATISTICSas at 31 December 2019

Age (%)

22

78

20 – 40 (2) 41 – 60 (7)61 – 79 (0)

Gender (%)

33

67

Male (3) Female (6)

2/9Ethics

9/9Strategy

0/9Sustainability

7/9Risk

9/9Corporate

Governance

1/9IT and Digital

2/9Legal and

Compliance

5/9Remuneration

3/9Finance and Assurance

4/9Stakeholder

Relations

2/9Reporting

1/9Marketing

SKILLS

The Board is comfortable that it adequately considers gender and race diversity. Therefore, there are no formal race and gender targets. The IoDSA strives to exceed the targets in the BBBEE scorecard for representation on our Board. Ensuring we have the right and necessary skills on our Board is always important and in 2019, digital and legal skills were material considerations for short-listed candidates to fill Board vacancies and both were acquired and retained, respectively, at the AGM.

The Board is satisfied that its composition reflects the appropriate mix of knowledge, experience, diversity and independence. For 2020, a focus will be on acquiring legal, sustainability and/or marketing skills.



Nomination, election and appoint-ment of Board membersThe Nominations Committee oversees this process. A call for nominations to the IoDSA Board is conducted annually. Candidates are proposed and seconded by IoDSA members, are required to be IoDSA members and to furnish information on their knowledge, skills and experience.

The Nominations Committee considers all candidates, based on the required knowledge, skills, experience and diversity needed on the Board. During the interview, social and personal competencies, other professional commitments and time availability are considered. Background and qualification checks are performed on the final short-listed candidates. Board members eligible for re-election are considered by the Nominations Committee based on their individual performance evaluations and attendance history at Board meetings.

The Board approves the candidates to be put forward for possible election at the AGM. A brief professional profile of each candidate standing for election accompanies the AGM notice. The voting process is conducted by secret ballot. All ballots are counted by the IoDSA auditors at the AGM and the new Board members are announced at the AGM.

All new Board members sign an appointment letter confirming terms and conditions relating to service as an IoDSA Board member. We also have a formal induction programme for new Board members.

In 2019 all Board members signed the updated Board Code of Conduct.

Furthermore, the IoDSA has a CPD Policy, to which all Board members adhered and signed confirmation for the 2019 year. All IoDSA training and other programmes and events are available to Board members. Mentorship is addressed informally where necessary.

Independence and conflictsBoard members declare conflicts of interest annually and thereafter review and confirm their declarations of interest at each Board and Board Committee meeting. Board members are further required to declare conflicts of interest relating to any matter on the Board or Board Committee agenda at the outset of the meeting. Declaration of interests is a standing agenda item at all meetings to ensure adherence to this. Any matters of concern are addressed with the individual member directly.

Chair and lead independent director of the BoardThe former Chair, Prieur du Plessis, served for half of 2019. Dr Prieur du Plessis retired in June 2019 and Muhammad Seedat (previous Lead Independent) was appointed as the new Chair. Louisa Stephens was elected as the new Lead Independent.

Their roles, responsibilities and terms of office are articulated in the Board Charter.

The Chair only serves on the Nominations Committee and Certifications Committee.



Audit and Risk Committee

Nominations Committee

Social and Ethics Committee

Certifications Committee

Remuneration Committee

Board of Directors

THE BOARD ENSURES ITS ARRANGEMENTS FOR DELEGATION IN ITS STRUCTURES PROMOTE INDEPENDENT JUDGEMENT AND ASSIST WITH BALANCE OF POWER AND THE EFFECTIVE DISCHARGE OF ITS DUTIES.

The Board delegates certain responsibilities to standing Board Committees, while maintaining ultimate accountability. The Board applies its collective mind to the information, opinions, recommendations, reports and statements presented by the Board Committees.

COMMITTEES OFTHE BOARD

We achieve effective collaboration between the Committees through cross-membership and coordinating meeting schedules. There is a balanced distribution of power in the spread of membership.

Each Committee has at least three members. The Board Charter allows for other Board members to attend all Committee meetings as observers.

The Board is satisfied that each Committee has the necessary knowledge, skills, experience and capacity to execute its duties effectively.

During 2019 the Certifications Committee (which was formed in late 2018) commenced its activities. The Investment Committee was removed as a Board Committee and areas for its consideration were pulled within the Audit and Risk Committee.

As at the end of 2019 the composition of the 5 Board Committees was as follows.






Louisa Stephens (Chair)

Muhammad Seedat (Chair)

Sana-Ullah Bray (Chair)

Felicia Msiza (Chair)

Ntuthuko Bhengu (Chair)

Felicia Msiza Ntuthuko Bhengu Ntuthuko Bhengu Sana-Ullah Bray Muhammad Seedat

Eileen Wilton Louisa Stephens Eileen Wilton Zeona Jacobs Sherma Malan (Executive)

John Burke (External)

Parmi Natesan (Executive)

Parmi Natesan (Executive)

Prof Mervyn King (External)

Sarita Martin (External)


Representatives of the external auditors (BDO Inc.) and internal audit (Nexia SAB&T), regularly attend meetings as invitees.

The Audit and Risk Committee considered the findings of the independent internal auditors, who were appointed and commenced work in January 2019.

The Committee reviewed the quality assurance mechanisms put in place during this period.

The Committee put the appointment of an external auditor out on tender and later in the year considered proposals for the appointment of the external auditor for 2020 going forward. Post year end a decision was made to recommend Mazars to the members at the AGM for appointment as external auditor.

A combined assurance plan was approved in 2019, which will be implemented in 2020.

Other recurring matters addressed by the Committee included:

• Preapproving 2018 annual financial statements, integrated report and governance report

• Monitoring quarterly financial progress, financial position and cash reserves

• Pre-approving budgets and related business plan• Assessing the finance function• Overseeing IT risks and controls• Reviewing external penetration testing results• Approval of risk register in line with the approved risk

appetite and tolerance• Considering audit summary and findings• Considering appropriateness of external auditor,

including competence, independence, rotation and BBBEE status.

The role of the Committee is to assist the Board with overseeing:


risk governance;

information and technology governance; and

investment management activities.

the effectiveness of the IoDSA’s assurance functions and services;

the integrity of the annual financial statements and, to the extent delegated by the Board, other external reports issued by the IoDSA;

The composition and meeting attendance of the Audit and Risk Committee is as follows:Scheduled

meeting attendance

MembersMembersLouisa Stephens 3/3Felicia Msiza 3/3Muhammad Seedat (until June 2019) 1/1Patrick Kabuya (until June 2019) 1/1Eileen Wilton (from June 2019) 2/2

Permanent InviteesPermanent InviteesParmi Natesan 3/3Angela Cherrington (until March 2019) 1/1Sherma Malan (from April 2019) 1/2Zandi Madikiza 3/3Vikeshni Vandayar 3/3


• Approving audit plan and audit fees for the 2020 audit of 2019 financial year

• Considering effectiveness of internal controls• Monitoring the IoDSA’s tax-exempt status• Considering the compliance review• Overseeing IoDSA investment portfolio and related

performance;• Reviewing and approving the Enterprise Risk

Management Policy and Technology and Information Governance Policy;

• Pre-approving the Committee Terms of Reference;• Reviewing and approving the Enterprise Risk

Management Framework and Technology and Information Governance Framework; and

• Reviewing and approving the Business Continuity Management Plan.

The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference for the 2019 financial year.

COMMITTEES OFTHE BOARD (continued)

With regards to its specific duties, the Audit Committee:

• is satisfied that the external auditor is independent of the IoDSA in that:

– no non-audit services were provided by the external auditor during the year, nor are these permitted to be provided; and

– a new individual audit partner was allocated in 2018;

• is satisfied with the quality of the external audit based on reports received;

• is satisfied with the quality of the internal audit based on reports received;

• is satisfied with the documentation of internal controls in the risk register;

• is satisfied with the finance function and the Executive: Finance & Operations.



With the Chief Executive Officer’s contract ending in March 2019, and the promotion of Parmi Natesan to CEO, careful consideration was given to the new Executive management team and organisation structure. The role of Executive: Finance & Operations was filled in February 2019 and two further Executive management appointments were made to oversee the service departments.

The Committee further considered the IoDSA succession plan of both management roles and key Board positions in light of recent appointments and changes within the Board.


• Considering appropriateness of the Board’s size and composition, with specific focus on the skills gaps that should be filled through new appointments

The role of the Committee is to assist the Board with overseeing:


the evaluation of the performance of the Board; and

the induction and ongoing training and development of Board members.

the appropriate composition of the Board for it to execute its duties effectively;

succession planning in respect of Board members and management;

a process for nominating, electing, re-electing and appointing members to the Board;

The composition and meeting attendance of the Nominations Committee is as follows:Meeting

attendance

MembersMembersPrieur du Plessis (until June 2019) 2/2Muhammad Seedat 4/4Louisa Stephens 4/4Ntuthuko Bhengu 2/4Sana-Ullah Bray (until June 2019)* 1/1Patrick Kabuya (until June 2019)* 1/1John Burke (External) (from August 2019) 1/1

Permanent InviteesPermanent InviteesParmi Natesan 4/4Angela Cherrington (until March 2019) 2/2

* Sana-Ullah Bray and Patrick Kabuya were recused from one meeting as it was regarding Board candidate interviews and they were both standing for re-election.

• Consideration of the composition of the Board Committees

• Reviewing the content and effectiveness of the director induction programme

• Approving the Board CPD Policy and Code of Conduct

• Reviewing and pre-approving the Committee terms of reference

• Considering nominees for Board vacancies, based on current skills and diversity needs of the Board, and recommending candidates for election

• Considering Board rotation for 2019

• Approving NED nomination process for 2019

• Overseeing CEO and other executives’ performance

• Overseeing executive professional development

The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference for 2019.



The Committee’s role is to assist the Board with overseeing that the IoDSA remunerates executives and employees fairly and responsibly, and that the disclosure of director and other applicable remuneration is accurate and transparent, as required by applicable laws and governance guidelines.


The composition and meeting attendance of the Remuneration Committee is as follows:Scheduled

meeting attendance

MembersMembersMuhammad Seedat (until June 2019) 2/2Sana-Ullah Bray 3/3Ntuthuko Bhengu 1/3Eileen Wilton (from June 2019) 1/1

Permanent InviteesPermanent InviteesAngela Cherrington (until March 2019) 2/2Parmi Natesan 3/3

With the changes in the executive structure and composition, the Committee focused on executive salaries as well as employee retention.


• Approving employee salary increase budget for 2020

• Considering the appropriateness of the IoDSA pension fund

• Approving bonus pool allocations for 2018, that were paid out in 2019

• Reviewing and pre-approving the Remuneration Policy and the Committee Terms of Reference

• Approving remuneration disclosure in the annual financial statements

The Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference for 2019.



The role of the Committee is to assist the Board with overseeing and reporting on organisational ethics, responsible corporate citizenship, sustainable development, stakeholder relationships, and other duties as set out in the Companies Act and Regulations.


The composition and meeting attendance of the Social and Ethics Committee is as follows:Meeting

attendance

MembersMembersFelicia Msiza 2/2Sana-Ullah Bray 2/2Zeona Jacobs 0/2Angela Cherrington (until March 2019) 1/1Parmi Natesan 2/2

Permanent InviteesPermanent InviteesSherma Malan (from April 2019) 1/1Zandi Madikiza 1/2Vikeshni Vandayar 2/2

With the anticipated reaching of the R50 million revenue threshold, an aggressive strategy to ensure compliance with BBBEE legislation was implemented with the intention of acquiring a Level 4 on the Generic Scorecard for the 2019/2020 assessment year.

Another focus was the improvement to the Stakeholder Engagement Framework; as well as the assessment of the IoDSA’s contribution to the United Nations Sustainable Development Goals.


• Considering the independent ethics assessment findings

• Overseeing the IoDSA’s compliance, including considering of the regulatory universe and levels of compliance thereof

• Considering ethical issues potentially impacting the IoDSA

• Reviewing and preapproving the Ethics Policy and employees Code of Conduct as well as the Committee Terms of Reference

• Considering the stakeholder engagement strategy

• Considering the reputation survey findings

• Monitoring employment equity and BBBEE progress against policy and strategy

• Monitoring and approving high-level human resource policies and reporting

• Monitoring employee wellness

• Monitoring the IoDSA’s impact on the environment




The Committee’s role is to assist the Board with overseeing the management of the designations appointed by the IoDSA.


The composition and meeting attendance of the Certifications Committee is as follows:Meeting

attendance

MembersMembersNtuthuko Bhengu 4/5Muhammad Seedat (from February 2019) 4/4Pumla Radebe (until January 2019) 0/1Parmi Natesan 5/5Angela Cherrington (until March 2019) 2/2Sherma Malan (from August 2019) 1/1Mervyn King (External) 3/5Sarita Martin (External) 5/5

Permanent InviteesPermanent InviteesSherma Malan (from April until August 2019) 4/4

This was a newly composed Committee of the Board and comprised of NEDs, executive Directors and external members.

The Committee terms of reference were approved at the beginning of 2019 and a Certifications Policy was reviewed and pre-approved in 2019.

The Chartered Director (South Africa) Handbook and Certified Director Handbook were also reviewed, updated and approved in 2019.


• Awarding the Chartered Director SA designation

• Awarding the Certified Director designation

• Recommending to the Board the revocation of any designation when necessary

• Appointing panelists to conduct the CD(SA) interviews with candidates who have successfully completed the PQE and examination




The Committee’s role is to assist the Board with overseeing responsibilities relating to the investment management activities of the IoDSA.

Investment Committee

The composition and meeting attendance of the Investment Committee is as follows:Meeting

attendance

MembersMembersPatrick Kabuya 1/1Louisa Stephens 1/1Zeona Jacobs 1/1Parmi Natesan 1/1Angela Cherrington 1/1

Permanent InviteesPermanent InviteesZandi Madikiza 1/1Vikeshni Vandayar 1/1

Representatives of the investment consultants, Grayswan Investments as well as Taquanta attended this one meeting for the year as invitees.

During 2019 it was decided to remove this Committee and add its scope to the Audit and Risk Committee.


THE BOARD ENSURES THAT THE EVALUATION OF ITS OWN PERFORMANCE AND THAT OF ITS COMMITTEES, CHAIR AND INDIVIDUAL MEMBERS, SUPPORT CONTINUED IMPROVEMENT IN THE BOARD’S PERFORMANCE AND EFFECTIVENESS.

EVALUATION OF THEPERFORMANCE OF THE BOARD

IoDSA Board Evaluation Scores 2014 – 2019

0

1

2

3

4

5

20192017201620152014

Evaluation score per year

3.7 3.6 3.6 3.6

4.3

The Board is functioning effectively according to its members. The issues that came through in the 2017 appraisal (conducted in early 2018) have to a large extent been resolved. The area that scored the lowest in this year’s appraisal was the Investment Committee, which was incorporated in the Audit and Risk Committee during late 2019 however for the purposes of the appraisal it was still rated as a separate Committee for completeness.

Individual Board member evaluations are conducted informally by the Chair.

The Board is satisfied that the performance evaluation process improves its performance and effectiveness and that the above approach is effective and works for the organisation.

Following the previous year’s informal evaluation, a formal facilitated Board evaluation took place at the beginning of 2020 for the 2019 performance year. The methodology was based on questionnaires completed by all the Board members, followed by robust interviews with the Board members by an external facilitator.

The Board rated its overall performance as good (with a score of 4.3 out of 5), which is above the NPO sector benchmark score of 3.5 and shows great progress from previous years. Board members feel that the board is operating at the best level it has been to date.


THE BOARD ENSURES THAT THE APPOINTMENT OF, AND DELEGATION TO, MANAGEMENT CONTRIBUTE TO ROLE CLARITY AND THE EFFECTIVE EXERCISE OF AUTHORITY AND RESPONSIBILITIES

CEO appointment and roleThe CEO is responsible for leading the implementation and execution of approved strategy, policy and operational planning. The Board sets clear roles, responsibilities and expectations in the CEO’s contract. The CEO serves as the main link between management and the Board, and is accountable and reports to the Board. The CEO’s performance is formally reviewed by the Board annually.

Angela Cherrington’s is fixed-term contract as CEO expired at the end of March 2019. Parmi Natesan, served as CEO Elect from January to March 2019 and became CEO on 1 April 2019.

Other professional commitments of the CEO, including membership of governing bodies outside the IoDSA, are considered by the Board.

DelegationThe detailed Board-approved delegation of authority framework articulates the powers reserved for the Board and those delegated to management. The Board ensures that key management functions are headed by individuals with the necessary competence and authority, who are adequately resourced.

The Board reviewed the delegation of authority framework and approval of changes were made to

APPOINTMENT AND DELEGATION TO MANAGEMENT

ensure the effective exercise of authority and responsibilities between the Board, and executive management and the management team as a whole.

The Board has a formal management succession plan that provides for contingency circumstances in the short and long term. Succession planning was considered in greater detail for key management executive positions and the Board considered this suitable taking into account the nature and size of the IoDSA.

Professional corporate governance services to the BoardDue to the nature and size of the organisation, the IoDSA does not have a company secretary. We use a third party for basic company secretarial services, such as minute-taking and filing statutory returns.

Professional corporate governance guidance is available to the Board from the IoDSA executives. The Board will follow the procedure for external professional advice as articulated in the Board Charter if independent advice is needed. The Board believes these arrangements are effective for the size and nature of the IoDSA.


RISK

GOVERNANCE

The Board assumes ultimate responsibility of the governance of risk, with elements delegated to the Audit and Risk Committee.

In 2019, management undertook a fresh approach to the organisation’s risk management culture, and re-established the Enterprise Risk Management Framework. The Board-reviewed and approved a restructured Enterprise Risk Management Policy.

The ERM Framework embodies a structured approach of aligning strategy, processes, people, technology and information with the purpose of evaluating and managing the uncertainties the IoDSA faces – aiming to reduce the likelihood and impact of all identified risks in order to enhance our ability to achieve strategic objectives.

This process above is adopted to review and enhance risk management practices, specifically focusing on improving the quality and effectiveness of process design, implementation and outcomes.

When assessing the risks, the IoDSA is willing to take, the Board considers and approves the IoDSA’s risk appetite and risk tolerance. Due to the nature of the business, the IoDSA is conservative in its appetite and tolerance for risk.

THE BOARD GOVERNS RISK IN A WAY THAT SUPPORTS THE IoDSA IN SETTING AND ACHIEVING ITS STRATEGIC OBJECTIVES.

Structured• for effective risk

management activities

Right people• have access

to...

Right information• at the ...

Risk policy• BCM

Organisation and structure• 3 lines of defence to...

Roles and responsibilities

Right time

PLANNING AND GOVERNANCE

RISK MANAGEMENT PROCESS

CONTINUOUS IMPROVEMENTS

COMMUNICATION AND CONSULTATION

CONTEXT SETTING

CONTINUOUS IMPROVEMENT

RISK ASSESSMENT

RISK TREATMENT

RISK MONITORING AND REVIEW

RISK GOVERNANCE

External and internal context

Process monitoring and review

Risk identification

Approach:

Risk reporting and monitoring

Risk appetite

Combined risk assurance

Risk analysis

Risk criteria

ERM capability

Risk evaluation

Mitigation plan• Cost vs benefit

Risk information system• Trends

• Avoid• Exploit• Reduce

• Share/Transfer• Accept

Refer to the 2019 Integrated Report for further information on risk.



TECHNOLOGYAND INFORMATION GOVERNANCETHE BOARD GOVERNS IT IN A WAY THAT SUPPORTS THE IoDSA IN SETTING AND ACHIEVING ITS STRATEGIC OBJECTIVES

The Board assumes ultimate responsibility for the governance of technology and information, with elements delegated to the Audit and Risk Committee.

The Board, through the Audit and Risk Committee, exercises ongoing oversight of risk management, in particular:

• identifying and assessing risks and opportunities;

• assessing the IoDSA’s reliance on resources and relationships;

• designing and implementing appropriate risk responses; and

• establishing and implementing business continuity arrangements.

Furthermore, the IoDSA Board maintains that it does not need periodic independent assurance on the effectiveness of risk management.

A new risk assessment tool was procured and utilised in 2019 and it was highly beneficial to the business in rating and assessing our business risks. A key risk for the IoDSA in 2019 was ensuring a suitable BBBEE scorecard level for the 2019 year as we anticipated falling within the Generic scorecard for the first time. A strong strategy was developed and implemented during the course of 2019.

Technology and information is governed and managed through a Board-approved Technology and Information Governance Policy, which was reviewed extensively in 2019 with key elements included and later approved by the Board. The implementation and execution thereof is delegated to management with appropriate Board oversight.

The Board, through the Audit and Risk Committee, oversees technology and information management, to achieve the strategy and manage risk. There were no major IT incidents in 2019, (similar to the previous 2 years).

A technology and information risk register was formulated and presented to the Audit and Risk Committee in 2019.

The Board considered the need for periodic independent assurance on the effectiveness of the IoDSA’s IT arrangements. In 2019, we received assurance via IT security penetration testing on the firewall, performed by an independent assurance provider. All shortcomings that were identified were addressed and no further deficiencies were noted.


COMPLIANCE

GOVERNANCE

Compliance is governed and managed through a Board-approved Compliance Policy. The implementation and execution thereof is delegated to management with appropriate Board oversight. A senior manager performs compliance reviews using Exclaim, a compliance tool that is continually updated for new legal requirements. The senior manager has legal expertise. As a standard, she reports compliance updates to the Executive: Finance and Operations twice a year, prior to Social and Ethics Committee meetings, or when necessary.

The Board, through the Social and Ethics Committee, oversees compliance to ensure a holistic view of the obligations it creates, and the rights and protections it affords. There was no material or repeated regulatory

penalties, sanctions or fines for contraventions of or non-compliance with statutory obligations imposed on the IoDSA or members of the Board. The Board will continue assessing compliance with core and secondary legislation, taking into account amendments and further obligations implemented.

The Audit and Risk Committee monitors tax compliance and the IoDSA has a good standing with SARS regarding its tax compliance status.

After due consideration, the Board decided it does not need periodic independent assurance on the effectiveness of compliance.

THE BOARD GOVERNS COMPLIANCE WITH APPLICABLE LAWS AND NON-BINDING RULES, CODES AND STANDARDS IN A WAY THAT SUPPORTS THE IoDSA BEING ETHICAL AND A GOOD CORPORATE CITIZEN

The Board assumes ultimate responsibility for governing compliance, with elements delegated to the Social and Ethics Committee.


REMUNERATIONGOVERNANCETHE BOARD ENSURES THAT THE IoDSA REMUNERATES FAIRLY, RESPONSIBLY AND TRANSPARENTLY TO PROMOTE THE ACHIEVEMENT OF STRATEGIC OBJECTIVES AND POSITIVE OUTCOMES IN THE SHORT, MEDIUM AND LONG TERM

The Board is ultimately responsible for governing remuneration, with elements delegated to the Remuneration Committee.

The Board, through the Remuneration Committee, approves a Remuneration Policy. This articulates and gives effect to its direction of fair, responsible and transparent remuneration. The policy is designed to:

• attract, motivate, reward and retain employees;

• promote the achievement of strategic objectives within the IoDSA’s risk appetite; and

• promote an ethical culture and responsible corporate citizenship.

The Board, through the Remuneration Committee, oversees the implementation and execution of the policy and ensures it achieves its objectives. The policy is tabled for a non-binding advisory vote by the members at the AGM. IoDSA members voted in favour of the Remuneration policy at the 2019 AGM.

NEDs do not receive remuneration for services as non-executive Directors, however they are reimbursed for their travel costs in attending Board and Board Committee meetings.

The Board considered the nature and size of the IoDSA and the lack of complexity of its remuneration structures, and determined that a separate remuneration report is unnecessary.

The Board deems appropriate the disclosures and reporting on the implementation of executive remuneration referenced in the notes to the annual financial statements, due to the size and nature of the business. Thus no separate remuneration implementation report is produced.


ASSURANCE

Combined assuranceThe Board assumes responsibility for assurance and delegates to the Audit and Risk Committee the responsibility for oversight of:

• the internal control environment;

• the integrity of information used for internal decision-making; and

• the integrity of external reports.

Due to the size and nature of the IoDSA, the Board is satisfied with the assurance it receives from management, external audit, internal audit and other independent advisors. A combined assurance plan in alignment with the Enterprise Risk Management Framework, was approved and will be implemented in 2020.

Assurance of external reportsThe Board receives assurance on the integrity of the annual financial statements from management, external audit and the Audit and Risk Committee.

The Board receives assurance on the integrity of the integrated report and governance report from internal management assessments and the Audit and Risk Committee. Furthermore, each Board Committee confirms their acceptance of their respective section in the governance report.

Internal auditThe IoDSA had an independent internal audit function for the first time in 2019, and they considered specific areas of review as per their mandated agreement.

Internal audit conducted a financial discipline review and confirmed the finance department was adequate for the organisation. Both a revenue discipline review and HR discipline review were conducted later in 2019 and both confirmed no material findings. In 2020 a finance discipline review and procurement discipline review will be conducted.

THE BOARD ENSURES THAT ASSURANCE SERVICES AND FUNCTIONS ENABLE AN EFFECTIVE CONTROL ENVIRONMENT, AND THAT THESE SUPPORT THE INTEGRITY OF INFORMATION FOR INTERNAL DECISION-MAKING AND THE IoDSA’s EXTERNAL REPORTS


STAKEHOLDERS

CONCLUSION

THE BOARD ADOPTS A STAKEHOLDER-INCLUSIVE APPROACH IN THE EXECUTION OF ITS GOVERNANCE ROLE AND RESPONSIBILITIES. THIS BALANCES THE NEEDS, INTERESTS AND EXPECTATIONS OF MATERIAL STAKEHOLDERS IN THE BEST INTERESTS OF THE IoDSA OVER TIME

The Board assumes ultimate responsibility for the governance of stakeholder relationships, with elements delegated to the Social and Ethics Committee. External stakeholder relationships are governed and managed through a Board-approved Stakeholder Policy.

The Board is satisfied with the application of corporate governance in 2019, as recommended in King IV on a proportional basis for the size and nature of the IoDSA. We believe that we uphold and implement the governance outcomes in King IV, namely: an ethical culture, ensuring effective controls, maintaining good performance, and continued legitimacy with all of our stakeholders.

In 2019, the CEO together with the executive management team completed a total review and amendment of the Stakeholder Engagement Framework. The CEO champions stakeholder relationship management and delegates this within management as appropriate.

The Board, through the Social and Ethics Committee, exercises ongoing oversight of stakeholder relationship management, in particular:

• methodologies for identifying stakeholders;

• determining material stakeholders;

• managing stakeholder risk;

• formal mechanisms for engaging and communicating with stakeholders; and

• measuring the quality of material stakeholder relationships.

The IoDSA is a non-profit company with members. Due to the dynamic nature of our membership, we do not have a set ownership structure. The Board encourages proactive engagement with members, including at the AGM. All Board members are available at the AGM to respond to member queries on the Board’s execution of its governance duties. The designated audit partner attends the AGM.

Various surveys were distributed to members, clients and other stakeholders in 2019 and all providing highly fruitful and beneficial information on how various stakeholders are feeling. Whilst a positive theme echoed among all surveys, they are analysed by management in order to implement better relations with IoDSA stakeholders.

Refer to the 2019 Integrated Report for more detail on stakeholder relations.

We continually strive tomake enhancements where deemed fit.



Better Directors. Better Boards. Better Business.

Board Leadership Programme

Board Learning Programme

Board Simulation Programme

Centre for Directorship and Corporate Governance

Certificate in Company Direction

Cert Dir

Certified Director

Chartered Director SA

CDSA

Code for Responsible Investing in South Africa

Company Directors Course

Director Development

Director Professionalism Course

Directors Club

Directors do Good

TRADEMARKS OWNED BY THE IoDSA

Directors Education Programme

For Directors By Directors

Get your Board on Board

Global Network of Director Institutes

GNDI

Institute of Directors

Institute of Black Directors in Southern Africa

IoD

IoD Directorship

IoDSA

King Code of Corporate Governance

King Report on Corporate Governance

King III

King III Report on Corporate Governance

Mastering the Boardroom

South African Code of Corporate Governance

King IV

King IV Report

King IV Report on Corporate Governance

King IV Code

Being a Director

Director Competency Framework

Director Sentiment Index

The following trademarks, amongst others, are owned by the IoDSA.

View our Intellectual Property Policy

https://cdn.ymaws.com/www.iodsa.co.za/resource/collection/F85F0CDA-6820-4BBA-A467-ED6EE14B0EE5/Intellectual_Property_Policy_2019.pdf

FEEDBACKWe value and encourage feedback on this report from our stakeholders.

CONNECT WITH US ON:

011 035 3000

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PO Box 521372Saxonwold2132

[email protected]

www.iodsa.co.za

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Institute of Directors in South Africa

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GOVERNANCE REP RT 2019

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Transcript of GOVERNANCE REP RT 2019